Antecedents and Outcomes of Partnering Abroad with Local Firms: Evidence from Cross-border Venture Capital

Abstract

Partnering with local firms in foreign markets has been a central strategy for firms to survive and thrive in international markets, and understanding the ways in which firms benefit from the status derived from their prior ties is a central issue in organizational and management studies. However, little is known about specific factors influencing a firm's local partnering decisions in foreign markets and particularly whether status, as a form of network resource, may assist firms in identifying and obtaining valuable local partners and thereafter reaching a high level of performance in foreign markets. In this dissertation, I address this gap through three separate studies. In the first essay, I empirically examine how uncertainty and experience influence a firm's choice to partner with local firms using a global sample of venture capital (VC) investments made during 1984-2011. I find that while venture-level uncertainty increases the need for partnering with local VC firms, experience in managing venture-level uncertainty reduces this need. By contrast, country-level uncertainty reduces the feasibility of partnering with local firms and decreases the need for it, whereas prior experience in the host country facilitates such partnering as a result of greater local knowledge, networks, and legitimacy. In the second essay, I study the transferability of a firm's home country status to foreign markets by focusing on the status of that firm's first local partners. Using a global sample of cross-border VC investments during 1994-2011, I find that status transfers to new markets through the mediating role of high status common partners. In the third essay, I examine how status at global and local levels affect firm performance in foreign markets differently and the contingencies of these performance effects related to a firm's position in the value chain and its focus on high technology ventures. Using an event history analysis of exit performance in cross-border VC investments in a global sample during 1996-2016, I find that global status lacks a significant performance effect but that local status has a positive performance effect in foreign markets, which is amplified in the upstream position of a value chain and weakened in high technology investments. This dissertation contributes to the literature on tie formation in interorganizational networks from the strategic needs perspective and from the social structural perspective. Moreover, it contributes to the international business literature on partnering with local firms and to the organizational status literature on both the transferability of status across social settings and the various advantages of status derived from embeddedness in different contexts. This dissertation also contributes to the extant literature on cross-border VC by investigating foreign VC firms' syndication behavior, interfirm networks, and performance in cross-border investments.